329 F.Supp.2d 337 (2004) | Cited 4 times | D. Connecticut | August 11, 2004


This is an action for damages arising from a businessarrangement pursuant to which the plaintiffs purchased chemicals,polymers, and other products from the defendants and resold themto customers located in India. The amended complaint allegesviolations of the Sherman Antitrust Act, 15 U.S.C. § 1, andcommon law tenets concerning breach of contract and negligentmisrepresentation. The defendants now move pursuant toFed.R.Civ.P. 12(b)(1) to dismiss the federal antitrust claim for wantof subject matter jurisdiction. For the reasons hereinafter setforth, the court concludes that the court has subject matterjurisdiction to adjudicate the claimed violation of the ShermanAntitrust Act, 15 U.S.C. § 1.

FACTS The background giving rise to the instant action is more fullydiscussed in the court's September 12, 2003 decision. See MMGlobal Services, Inc. v. Dow Chemical Co., 283 F. Supp.2d 689(D. Conn. 2003). While familiarity is presumed, the facts aresummarized as follows.

In 1984, the defendant, Union Carbide, a New York corporationheadquartered in Connecticut, owned and operated a chemical plantin Bhopal, India. In December of that year, lethal gas escapedfrom the plant and caused the death of 3,800 persons and injuriesto an additional 200,000. In February 1989, Union Carbide and itsIndian affiliate were ordered to pay a total of $470 million forall civil claims arising from the tragedy.

In the aftermath of this tragedy, Union Carbide ceased sellingproducts directly to customers in India and, in 1987, appointedthe plaintiff, Mega Visa Marketing Solutions Ltd. ("MVMS"), as anon-exclusive distributor to maintain Union Carbide's access tothe Indian marketplace. MVMS is an Indian corporation, having itsprincipal place of business in Mumbai, India.

Over the next several years, MVMS formed corporate affiliateswith the purpose of assisting with product sales in India. Theaffiliates purchased Union Carbide products in the United States and resold them to end-users in India. Theaffiliates included the plaintiffs, Mega Global Services, Inc.("MMGS"), Mega Visa Marketing Solutions, Ltd. ("MVMS"), MegaGlobal Services, Inc. — Singapore ("MMGS-S"), and Mega VisaSolutions (S) Pte. Ltd. ("MVS").

In August 1999, Union Carbide announced a plan of merger withthe co-defendant herein, Dow Chemical Company ("Dow"). Dow is acorporation organized under the laws of Delaware, with aprincipal place of business in Midland, Michigan. The amendedcomplaint alleges that with the plan of merger, the need droppedfor the re-sale services in India previously performed by MVMS,MVS, MMGS and MMGS-S. Consequently, the amended complaint allegesthat Union Carbide and its affiliates ceased acting consistentlywith their alleged contractual and legal obligations and, inparticular, undertook efforts to establish Dow, untainted by theBhopal tragedy, in place of the plaintiffs as a direct seller ofproducts to end-users in India.

On February 6, 2001, Union Carbide merged with a subsidiary ofDow and became a wholly owned subsidiary of Dow. At around thistime, Dow also created the defendant, Dow Chemical Pacific(Singapore) Private Ltd. ("Dow Singapore"). Dow created DowSingapore to effectuate sales of Union Carbide products to the plaintiffs and to further Union Carbide and Dow'srelationship with the plaintiffs.

On January 16, 2002, Dow Singapore advised MVS that, effectiveMarch 31, 2002, MVS would no longer be a distributor for UnionCarbide products other than wire and cable compounds. MVS refusedto continue the relationship with Dow Singapore on those terms.

On June 25, 2002, the plaintiffs commenced this lawsuit againstthe defendants, Union Carbide and Dow, alleging violations of theSherman Antitrust Act, 15 U.S.C. § 1, and common law preceptsconcerning breach of contract and negligent misrepresentation,among other theories. The plaintiffs also sued several UnionCarbide/Dow affiliates, including the defendants Union CarbideAsia Pacific, Inc. ("UCAP") (Singapore), Union Carbide CustomerService Pte. Ltd. ("UCCS") (Singapore), and Dow Chemical PacificPrivate Pte. Ltd. (Singapore).1

In connection with the federal antitrust claim, the plaintiffsalleged that, from 1993 through March 2002, Union Carbide andDow, directly and through their affiliates, compelled theplaintiffs to agree to engage in a price maintenance conspiracy with respect to the resale of UnionCarbide products in India, and refused to accept orders orcancelled accepted orders if the prospective resale prices toend-users in India were below certain levels. According to theamended complaint, Dow and Union Carbide sought to "ensure thatprices charged by [the] [p]laintiffs to end-users in India for[p]roducts would not cause erosion to prices for the [p]roductscharged by [Union Carbide] and Dow to end-users . . . in theUnited States as well as in other jurisdictions . . .," and that, [a]s a direct and proximate result of [the] [d]efendants' fixing of minimum resale prices and other terms of sale, competition in the sale and resale of [Union Carbide] products in and from the United States was improperly diminished and restrained . . .

On April 23, 2003, the defendants moved to dismiss theantitrust claim, arguing that, because the amended complaintfailed to allege antitrust conduct having a direct, substantial,and reasonably foreseeable effect on U.S. commerce, the court waswithout subject matter jurisdiction to hear the claim under theForeign Trade Antitrust Improvements Act of 1982 ("FTAIA"),15 U.S.C. § 6a(1). On September 12, 2003, the court denied themotion. On March 18, 2004, the court reconsidered that ruling butdenied the relief requested. On March 31, 2004, the defendants moved forcertification of that ruling for interlocutory appeal pursuant toU.S.C. § 1292(b). On June 11, 2004, the court denied that motion.


A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) mustbe granted if a plaintiff has failed to establish subject matterjurisdiction. Golden Hill Paugussett Tribe of Indians v.Weicker, 839 F. Supp. 130, 136 (D. Conn. 1993). In analyzing amotion to dismiss under Rule 12(b)(1), the court must accept allwell pleaded factual allegations as true and must draw reasonableinferences in favor of the plaintiff. Capitol Leasing Co. v.F.D.I.C., 999 F.2d 188, 191 (7th Cir. 1993). Where a defendantchallenges the district court's subject matter jurisdiction, thecourt may resolve disputed factual issues by reference toevidence outside the pleadings, such as affidavits. AntaresAircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 96(2d Cir. 1991).


The defendants move to dismiss the case on the ground thatjurisdiction is not authorized under the Foreign Trade AntitrustImprovements Act of 1982 ("FTAIA"), 15 U.S.C. § 6a(2). Inprevious rulings, the court addressed whether jurisdiction was authorized under § 6a(1) of the FTAIA andconcluded that it was. See MM Global Services, 2004 WL556577, *1 (D. Conn. Mar. 18, 2004). The defendants now contendthat jurisdiction is precluded by § 6a(2) because the plaintiffshave failed to allege, as required by F. Hoffman-La Roche Ltd.v. Empagran S.A., 124 S.Ct. 2359 (2004), that the defendants'misconduct gave rise to antitrust effects in the United Statesthat injured the plaintiffs.

In response, the plaintiffs assert that jurisdiction is notprecluded by § 6a(2). Specifically, the plaintiffs contend thatthe amended complaint alleges "more than sufficient causal linksbetween [the] plaintiffs' injuries and the domestic effect of[the] defendants' misconduct to satisfy § 6a(2)."

Section 1 of the Sherman Act provides in relevant part: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. 15 U.S.C. § 1.

The reach of the Sherman Act, however, is limited.Metallgesellschaft AG v. Sumitomo Corp., 325 F.3d 836, 838 (7thCir. 2003). Under an amendment to the Sherman Act, known as theForeign Trade Antitrust Improvements Act of 1982 ("FTAIA"), 15 U.S.C. § 6a, the court does not have jurisdictionto adjudicate antitrust conduct that:

involv[es] trade or commerce (other than import trade or import commerce) with foreign nations unless — 1) such conduct has a direct, substantial, and reasonably foreseeable effect — A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and 2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section. If [the Sherman Act applies] to such conduct only because of the operation of (1)(B), then [the Sherman Act] shall apply to such conduct only for injury to export business in the United States.15 U.S.C. § 6a. Thus, pursuant to § 6a(2), the court does nothave jurisdiction to adjudicate Sherman Act violations unless theplaintiffs are able to show, among other things, that themisconduct at issue caused effects on United States commercewhich gave rise to a claim under the Sherman Act.

Prior to the Supreme Court's decision in Empagran,124 S.Ct. 2359 (2004), federal circuits were divided on the meaning of thephrase "giving rise to a claim" in § 6a(2). Some circuits,including the Second Circuit, had concluded that "giving rise to a claim" refers to a claim in general, withoutregard to whether the plaintiff suffered an injury. See Krumanv. Christie's Int'l PLC, 284 F.3d 384 (2d Cir. 2002) (holdingthat the "plain meaning" of the statutory language "a claim"refutes the defendants' argument that the plaintiff must allegethat the anti-competitive effect gives rise to "his claim"(emphasis added)); see also Empagran, 315 F.3d 338, 352(D.C. Cir. 2003). Other circuits, however, held that "giving riseto a claim" refers to a claim brought to redress the plaintiff'sspecific antitrust injury, and thus concluded that § 6a(2)requires the plaintiffs to allege that the misconduct at issuecaused domestic effects on commerce that gave rise to theiractual injury. See Den Norske Stats Oljeselskap As v. HeereMacVof, 241 F.3d 420, 427 (5th Cir. 2001).

In F. Hoffman-La Roche Ltd. v. Empagran S.A., 124 S.Ct. 2359(2004), the Supreme Court overruled Kruman and held that"giving rise to a claim" refers to the plaintiff's claim ofinjury. Id. Consequently, jurisdiction is authorized under theFTAIA only when the plaintiff has alleged that the defendants'conduct affected U.S. commerce and that the effect gave rise tothe plaintiff's injury. Empagran, 124 S.Ct. at 2371-2372.Summarizing the rule, where the defendant's conduct affects both domestic and foreign commerce, but theplaintiff's injury arises only from the conduct's foreign effectand not its domestic effect, the plaintiff's injury isindependent from the domestic effect and the court has nojurisdiction. Empagran, 124 S.Ct. at 2363.

The defendants now contend that, in light of Empagran, theplaintiffs no longer satisfy § 6a(2) and the court lacks subjectmatter jurisdiction as a result. Specifically, the defendantsargue that the plaintiffs have not and cannot now assert thatdomestic effects on commerce led to their injuries, as requiredby Empagran, because the "[p]laintiffs have built their casearound the proposition that Indian resale price maintenance ledto higher prices in the United States, not the other way around"(emphasis omitted). In other words, the defendants assert that itis impossible for the plaintiffs to allege both that theirinjuries gave rise to domestic effects on commerce and thatdomestic effects also gave rise to their injuries.

The plaintiffs respond that the Empagran decision "wasexpressly limited to whether the Sherman Act conferredjurisdiction over foreign effects that are `entirely independent'of domestic effect[s]." In the plaintiffs' view, "there isnothing in [Empagran] that precludes jurisdiction over domestic effects `flowing' to and from foreign effects"(emphasis omitted). In other words, the plaintiffs assert thattheir injuries were not independent from effects on U.S.commerce, and contend that it is possible for their injuries toboth arise from and give rise to effects on domestic commerce.

The court does not agree with the defendants that theplaintiffs have failed to allege the requirements of § 6a(2),i.e., that the defendants' conduct led to effects on U.S.commerce that gave rise to the plaintiffs' injuries. The amendedcomplaint alleges that: As a direct and proximate result of [the] [d]efendants' fixing of minimum resale prices and other terms of sale, competition in the sale and resale of [p]roducts in and from the United States was improperly diminished and restrained, and as the result of such effect on competition, [the] [p]laintiffs were injured by being precluded from effectively and fully competing and maximizing their sales of [p]roducts.(emphasis added). The complaint properly alleges that thedefendants' conduct had an effect on competition in and from theUnited States and the plaintiffs were injured as a result of thateffect. Accordingly, dismissal for failure to satisfy § 6a(2) isinappropriate. The defendants also argue that the plaintiffs are barred by thedoctrine of judicial estoppel from asserting that domesticeffects led to their injuries because the plaintiffs have alreadyalleged that their injuries gave rise to the effects on commerceand have "persuaded this [c]ourt to rely upon it, repeatedly, inrendering multiple decisions." Specifically, the defendantscontend that the plaintiffs cannot change their allegationsbecause the court has already adopted the plaintiffs' view thattheir injuries directly affected U.S. commerce, as the courtconcluded: [I]t is . . . quite foreseeable to conclude that a conspiracy to fix prices in the Indian market might reasonably cause direct and substantial effects on the prices charged for the same products in the United States.MM Global Services, 2004 WL 556577, at *6 (D. Conn. Mar. 18,2004). However, the defendants have misconstrued the court'sstatement. The court was not alluding to the plaintiff's injuryin its reference to "a conspiracy to fix prices in the Indianmarket," but to the defendants' conduct. Thus, the court was onlystating that the defendants' conduct may have given rise toeffects on U.S. commerce. The court has not held that theplaintiffs' injuries gave rise to domestic effects on commerce.Further, the court does not agree with the defendants that it isinconceivable for both domestic effects to give rise to the plaintiffs' injuries and for thoseinjuries to also affect domestic commerce. The court thereforeconcludes that the plaintiffs have sufficiently satisfied therequirements of the FTAIA. Accordingly, the court has subjectmatter jurisdiction to adjudicate the plaintiffs' Sherman Actclaim.


For the foregoing reasons, the motion to dismiss for lack ofsubject matter jurisdiction (document no. 199) is DENIED.

It is so ordered.

1. On November 17, 2003, the court dismissed the amendedcomplaint with respect to UCCS and Dow Singapore for want ofpersonal jurisdiction.

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